The Greek economy is under the microscope of the rating agencies as the first ratings for 2025 begin. 2024 had ended with the country’s credit rating being upgraded to a higher investment grade position by Scope.

The Finance Ministry expects 2025 to be a year of further upgrades, given the economy’s continued strong growth performance, the smooth absorption of Recovery Fund resources and the reforms it entails, and the high primary surpluses recorded in the budget.

The “dance” of ratings will be opened on March 7 by the Canadian DBRS, which had upgraded the outlook for the economy from “stable” to “positive” last September. Recently, the house in its analysis stressed that the Greek economy has shown remarkable resilience despite multiple shocks (pandemic, energy crisis) and remains on the path of sustainable growth.

DBRS gave Greece an investment grade rating in September 2023 (BBB with a stable trend) and in September 2024 upgraded the trend to positive, raising expectations for a new Greek rating upgrade this year. If that doesn’t come in March, there will be another possibility with the agency’s new rating on September 5.

It will be followed a week later on March 14 by Moody’s, which upgraded the outlook for the Greek economy from “stable” to “positive” in September.

Moody’s is the only one of the five ECB-recognized agencies that has not yet given Greece an investment grade, but this could be the year that it does so, given that its rating is one notch below (Ba1) and last September it revised the outlook to positive. Moody’s second Moody’s rating this year is due on September 19.

Moody’s last September revised its outlook on the country’s credit rating (Ba1) to positive from stable, noting better-than-estimated budget execution and an improving banking sector.

On April 18 it will be Standard & Poor’s turn to announce its own rating.

Greek bonds

2024 was a turning point for Greek bonds as there was higher demand from foreign investors, and indeed from investors who had not bought Greek securities for more than 10 years.

According to Riccardo Abbona, Managing Director Head of DCM & Risk Solutions, Greece & Italy – Barclays, the new composition of the investor base was confirmed by the addition of 26 new accounts to the Top-50 investor list for Greek bonds in 2024.

In 2024, given the achievement of an investment grade in 2023, Greece/ODHH, proceeded with two very successful new benchmark 10-year and 30-year OED issues. Through these two syndicated bond issues, Greece raised EUR 4 billion and EUR 3 billion respectively, a record amount and at the same time expanded its real money investor base by 30%, having achieved new records in terms of order book size, investor quality and lower borrowing spreads. According to Alpha Bank, the Greek government bond index recorded the second highest total return (after Italy) among Eurozone countries in 2024.

There are several catalysts that could sustain the positive performance of Greek bonds into 2025. First, the supportive macroeconomic environment, with continued fiscal outperformance prominent, strengthens the scope for further Greek debt rating upgrades in the next two years 2025-2026.

The policy of early repayment of public debt will continue in 2025. The government within the next year will proceed with the early repayment of €5 billion of Greek Loan Facility loans that would mature between 2033 and 2042.

According to the projections, government debt is estimated to fall from 163.9% of GDP at the end of 2023 to 154% of GDP at the end of 2024, to be further reduced to 147.5% of GDP at the end of 2025. Taking into account the country’s fiscal progress and the growth rates of the Greek economy, the IMF has projected that the debt reduction will amount to 30 percentage points of GDP by 2029.

In 2025, Moody’s is expected to upgrade the country to investment grade, which will maintain demand for Greek bonds, according to analysts at Alpha Bank.

Wood in a recent analysis believes Greek bonds are “underpriced” based on the strong story of the Greek economy.

Swiss bank UBS “sees” an upgrade to investment grade by Moody’s. It stresses that Greek bonds are a buying opportunity.